\u3000\u3000 Tangrenshen Group Co.Ltd(002567) (002567)
Event overview: the company released the performance forecast for 2021: it is expected that the net profit attributable to the parent company will lose 980-1.15 billion yuan in 2021, a year-on-year decrease of 203.12% – 221.01%; Net profit deducted from non parent company is expected to lose RMB 880-1.05 billion, with a year-on-year decrease of 195.72% – 214.21%.
Pig prices entered a downward cycle and the breeding business suffered deep losses. Since the second half of 2021, China’s pig price has been depressed, the cost of feed and epidemic prevention has remained high, and the fattening cost has fluctuated abnormally due to the purchase of high price piglets in the early stage. The profit of the company’s pig business has fallen sharply year-on-year, resulting in deep losses. The company sold 1542300 pigs in 2021, with a year-on-year increase of 50.6%; The average sales revenue of raw pig heads was about 1667 yuan, a year-on-year decrease of 33.4%, of which the sales price of fat pigs decreased by about 51% year-on-year.
Full provision for impairment will be made and young people will be ready in 2022. 1) The company’s asset impairment and low efficiency disposal of sows totaled about 300 million yuan, resulting in a loss of about 300 million yuan due to the company’s asset impairment and low efficiency; 2) Due to the low price of poultry products during the reporting period, the profits of M & A enterprises Shandong Hemei and Hunan Jitai agriculture and animal husbandry fell sharply, and the company made provision for goodwill impairment; At the same time, the interest expense also increased due to the increase of production expansion loans, and the total financial and impairment expenses were about 300 million yuan. We believe that the impairment items accrued by the company in 2021 take full account of the current operating conditions and the future trend of pig price, which will help the company to go into battle in 2022.
Counter cyclical steady expansion, breeding costs still have room for improvement. The fattening cost of the company is expected to stabilize as the high priced piglet seedlings are completed by the end of 2021. Looking forward to 2022, the company will carry out more activities and reduce costs and increase efficiency. The production of new Danxi breeding pigs introduced in the early stage will significantly improve the production efficiency of sows; The company plans to slaughter 2 million pigs and 3.5 million pigs respectively from 2022 to 2023, of which the proportion of self breeding capacity Longhua agriculture and animal husbandry is expected to be about 30% and 40%, which will effectively reduce the average head cost.
This cycle should pay special attention to enterprises with both financial stability and performance flexibility. The time point of the worst performance of breeding stocks has passed, and the rapid increase of enterprise production capacity will raise the valuation bottom of the sector as a whole. If we only focus on the cycle and ignore growth, it is very easy to lead to the risk of falling short. At present, the pig price is still at the bottom of the shock period. We have repeatedly stressed that we should pay special attention to enterprises with both financial stability and performance flexibility.
Investment suggestion: in 2021, the company’s performance was dragged down by the decline of pig price, so we reduced the net profit attributable to the parent company from 2021 to 2023 to -1.067/2.26/1.111 billion yuan, and the corresponding EPS was -0.89/0.19/0.93 yuan / share respectively. However, considering that the breeding cost of the company will continue to decrease in the future, and with the improvement of pig price operation center in the second half of 2022, the profitability of the company is expected to be improved, so the “recommended” rating is maintained.
Risk warning: the company’s performance is lower than the expected risk; Policy regulation leads to the risk that the rebound of pig price is less than expected; The reduction of pig production capacity is less than the expected risk; Spread risk of classical swine fever; Risk of price fluctuation of raw materials caused by weather disasters.
